Foreign Relations of the United States Diplomatic Papers, 1932, The Far East, Volume III

793.94/4268: Telegram

The Consul General at Shanghai (Cunningham) to the Secretary of State

Shanghai, February 17, 1932—5 p.m.
[Received 7:40 p.m.]

64. Continuing my daily report 61, February 16, 6 p.m.⁵⁶

1. Last night at 11:30 the heaviest artillery bombardment yet opened by the Japanese began in the Chapei sector and continued for some time. Since then things have been relatively quiet on all fronts. It is known that the 19th Route Army is very short of ammunition. The Japanese infantry took over the front line position in the Chapei sector from the naval landing forces yesterday afternoon. Japanese troops are reported to be advancing along the Hsiangying Road with Kiangwan as their objective.

2. Since the last report some 18 shells have fallen within the Settlement boundaries. One fell on the Shanghai-Hongkew Wharf pontoon in the vicinity of Chaoufooung Road killing a Chinese female and seriously wounding two British naval guards and six Chinese.

3. An unconfirmed rumor is to the effect that neither the Japanese nor the Chinese are desirous of continuing the struggle. It is a matter of finding a modus vivendi that will be satisfactory to both sides. According to the same source the Japanese frankly admit that they do not want to carry on the struggle because of the cost. It is also stated that the high officers of the 19th Route Army are willing to retire provided a face-saving formula can be found. The opposition to this retirement comes first, from the mass of the Chinese people who are “mad” and secondly, from the rank and file of the 19th Route Army who feel that they can defeat the Japanese. An unconfirmed rumor also states that the Japanese and Chinese are carrying on discussions on the basis that the 19th Route Army retire from Shanghai and that the Japanese withdraw within the defense lines of the Settlement. The Chinese are willing to allow the Japanese to retain a certain number of troops within the Settlement defense lines proportionate to the number stationed here by other nationals. The same source stated that for the present these negotiations must be carried on between the Japanese and Chinese. Later foreign mediators may be asked to see that the conditions of the potential agreement are carried out. I give but little credence to these rumors.

4. It is my personal opinion that if the civilian Chinese negotiators are able to convince the 19th Route Army that they are facing inevitable defeat if they persist in their present course, it is possible that this organization may gradually disintegrate.

5. The financial situation in Shanghai among the Chinese native banks continues in a parlous state. The modern and native bankers have formed a sort of super-banking organization with a capital of $75,000,000 for the purpose of preventing the native banks from going to the wall. Many native shops have not reopened because it is believed that they are financially unable to do so. For this same reason foreign firms are finding it impossible to cash native drafts.

6. Shanghai consignees are refusing drafts unless merchandise has immediate sale. Advise further shipments only against irrevocable letter of credit. This situation is the result of the attitude adopted by Chinese native banks in refusing to release any hard cash. The congestion upon piers and in warehouses continues without perceptible abatement.

7. It is understood that T. V. Soong and certain other Government officials have approached the Chinese banks with a proposal that the period for all domestic bonds be extended 3 years, and that the period of amortization of all loans be extended for 3 years and that a flat rate of 6 percent be set. This would naturally give the Government a larger income and it is believed that there is an implied threat back of this that if it is not agreed to a moratorium will be declared.

8. On February 15th the American marines reported that eight 75 mm. high explosive shells with time fuses fired from the Hongkew rifle range struck in the first battalion area near post number 5 and passed the wall of the Foufoong godown, exploding in a high stack of flour. Two others exploded nearby and others struck in the Soochow Creek. One missed a marine patrol by 15 or 20 feet, another a sentry squad by about 50 feet and all struck within 100 yards of 2 officers and 31 men. When the Japanese Army headquarters were communicated with they said they would correct their range.

9. The Standard Oil Company reports that their ship the Meitung, when proceeding from Soochow to Shanghai by Setai Lake and the Whangpoo River, was fired upon by soldiers near the Zahweikong Railway Station and was forced to turn about and proceed towards Minghong.

10. It is reported that the First and Second Divisions of the Chinese Emergency Corps have been reorganized into the 87th and 88th Divisions and will be sent to Shanghai to assist the 19th Route Army. The Tax Police Corps formerly under the direct command of the Ministry of Finance has been incorporated into the 88th Division as an independent brigade consisting of nine regiments.

11. The Japanese continue to interfere with the exercise of police jurisdiction within the Settlement boundaries. On February 14th a British subject was held up on Dixwell Road near North Szechuan Road by Japanese marines and reservists who made him alight from his car and searched him. His curfew and emergency passes were taken from him and torn up. On February 15th a male Chinese was arrested by Japanese reservists on Broadway and Boone Road and taken to an unknown destination. On February 16th a male Chinese was seen being taken along Woochang Road towards the Japanese temple by a Japanese civilian. On February 16th, two male Chinese were seen being taken into the Japanese school in Range Road by two Japanese marines. On February 16th, a male Chinese was seen in the custody of Japanese marines being taken along Woosung Road. The Japanese promises to return municipal functions to the Shanghai Municipal Council are by no means being fulfilled and if any assistance can be extended it would be greatly appreciated.⁵⁷

Repeated to the Legation and Nanking.

Cunningham

56. Not printed.
57. On February 19 the Consul General at Shanghai telegraphed as follows (No. 79, February 19, 4 p.m.): “Referring to my telegram No. 64, February 17, 5 p.m., due to the changed conditions it is requested that the last sentence therein be canceled.” (793.94/4297)